Acct. Ch 2 Managerial Accounting & Cost Concepts

direct

(direct/indirect) costs can be conveniently traced to cost objects

sunk

______ costs are always irrelevant in decisions and should be ignored

period

______ costs are taken directly to the income statement as expenses in the period in which they are incurred

product

_______ costs are assigned to inventories and are considered assets until the products are sold

variable

_______ costs, in total, are strictly proportional to activity

fixed

________ costs, in total, remain the same as activity level changes within the relevant range

in total

a fixed cost remains fixed __ ____ within the relevant range of activity

opportunity cost

a potential benefit that is forfeited or lost when one decision is chosen over another

COGS, income statement

at the point of sale, product costs become _______ on the _____ _________

straight, cost, activity

cost behavior is considered linear whenever a _____ line approximates the relationship between _____ and ______

direct

costs that can be easily and conveniently traced to a specific product are called _____ costs

product, period

for external reporting purposes, costs are classified as either _______ or ______ costs.

direct, indirect

for purposes of assigning costs to cost objects such as products or departments, costs are classified as _________ or ________

variable, fixed, mixed

for purposes of predicting how costs will react to changes in activity, costs are classified into three categories: ________, ______ and ______

high low

if the relation between cost and activity appear to be linear based on a scattergraph plot, then the variable and fixed components of a mixed cost can be estimated using the _____ _____ method

variable

mixed costs are also known as semi-________ costs

income statement, expenses

period costs are taken directly to the _______ ________ as _________ in the period in which they are incurred

inventories, assets

product costs are assigned to _________ and are considered ______ until the products are sold

contribution

the _______ format income statement aids decision making because it organizes costs using variable and fixed cost classifications

decreases

the average fixed cost per unit ________ as the activity level increases

straight, activity

the high low method implicitly draws a ______ line through the points of lowest and highest _____

relevant range

the level of activity within which variable and fixed cost assumptions are valid

least-squares regression (method)

the method which uses all of the data points to compute a regression line that minimizes the sum of the squares errors

historical, predictions

the preparation of external financial reports requires the use of _____ cost data, whereas decision making may require _______ about future costs

external

the traditional income statement format is used primarily for ______ reporting purposes

constant

the variable cost per unit is ________

in total

variable costs vary __ ___ within the relevant range of activity